jpg” alt=”” width=”300″ height=”240″ />Last week I highlighted some fairly positive news from a recent Wells Fargo/Gallup survey even though the media headlines appeared otherwise. Despite low interest rates on investments, more people than not are confident they will be able to
retire when they plan to. And the majority of current retirees are confident they will be able to maintain their current standard of living while not outliving their money.
There is some cause for concern, however. Feeling confident about doing something and actually doing it are two different things. The problem with confidence is, without a real assessment of one’s means, ability and initiative, it is often mixed with delusion. I could feel confident about pursuing a second career as a professional basketball player but it will never happen since I lack the ability, means and the initiative it would take (not to mention, I am vertically challenged).
So back to the survey. Low int
erest rates remain a concern for both nonretirees and retirees, but not enough to change their behavior of most:
- 22 percent of nonretirees and 43 percent of retirees believe that low interest rates hurt savers and investors and that the costs outweigh the benefits.
- However, only 26 percent of nonretirees and 19 percent of retirees would consider putting their money into investments they might “otherwise avoid.”
- 70 percent of nonretirees and three-fourths of retirees would not “take more overall investment risk” than they would if interest rates were higher.
In other words, although most one-year CDs returning less than 1 percent annually, savers and investors prefer to play it safe or go with what they know. Without knowing from the survey exactly how each respondent invests (although the respondents were heads of households or spouses with at least $10,000 in savings and investments), sticking with what is familiar can be good, if it works. But knowing all there is to know about CDs, who has the best rates, how to ladder them, etc. and
feeling confident doesn’t help much when inflation comes knocking at the door.
Today’s preparation for retirement often involves stepping outside of one’s comfort zone, going from “I’ve always done it this way,” to “It’s time to look at other investment options.” This is especially true for nonretirees who are at least a decade away from retiring. Confidence is fine, but combined with initiative, ability and means, it is the only way to retire.